TREASURIES-U.S. bond yields slip on month-end buying

* U.S. 2-, 10-year part of yield curve flattest in 7 months

* U.S. bond market to close early at 2 p.m. (1800 GMT)

(Updates market action, adds quote) NEW YORK, May 26 (Reuters) - U.S. Treasury yields fell on Friday as investors bought bonds to rebalance their portfolios at month-end, overriding an upward revision to first-quarter gross domestic product and a smaller-than-forecast drop in durable goods orders for April. The S&P 500 and Nasdaq held near their record closing highs set on Thursday, stoking some safe-haven demand for U.S. government debt in an abbreviated trading session, analysts said. The U.S. bond market will close early at 2 p.m. (1800 GMT) and will be shut on Monday for the U.S. Memorial Day holiday. "People are squaring up before the long weekend," said Kathy Jones, chief fixed income strategist at Schwab Center for Financial Research in New York. "We are chopping around at the low end of the recent trading range." At 11:16 a.m. (1516 GMT), the benchmark 10-year Treasury note's yield was down less than 1 basis point at 2.248 percent on light trading volume. It traded in a tight seven-basis-point range this week. The drop in the 10-year yield narrowed its gap with the two-year yield to a shade less than 94 basis points, the tightest in seven months, Tradeweb data showed. This flattening of the yield curve suggested traders had dialed back their outlook for U.S. growth and inflation to levels prior to Donald Trump's presidential win. Trump and leading Republican lawmakers have not delivered tax cuts, a healthcare overhaul and infrastructure spending, which would bolster business investments and consumer spending. Still Friday's data signaled the U.S. economy was expanding, albeit at a modest clip. This may allow the Federal Reserve to raise interest rates further and to begin paring its $4.5 trillion balance sheet. Gross domestic product grew at a 1.2 percent annual rate in the first quarter, faster than the 0.7 percent pace reported last month, the Commerce Department said in its second estimate. The agency also said durable goods orders fell 0.8 percent in April, compared with a revised 2.3 percent gain in March and a 1.2 percent decline forecast among analysts polled by Reuters.

May 26 Friday 10:58AM New York / 1458 GMT Price

US T BONDS JUN7 154-1/32 0-6/32 10YR TNotes JUN7 126-64/256 0-20/256 Price Current Net Yield % Change


Three-month bills 0.9175 0.9323 0.000 Six-month bills 1.0525 1.0727 -0.002 Two-year note 99-232/256 1.2976 0.000 Three-year note 100-34/256 1.4539 -0.003 Five-year note 99-214/256 1.7845 -0.005 Seven-year note 99-164/256 2.0554 -0.012 10-year note 101-48/256 2.2412 -0.014 30-year bond 101-224/256 2.9058 -0.015


Last (bps) Net

Change (bps)

U.S. 2-year dollar swap 23.50 -0.25


S U.S. 3-year dollar swap 21.25 -0.25


U.S. 5-year dollar swap 8.75 0.25


U.S. 10-year dollar swap -5.00 0.50


U.S. 30-year dollar swap -43.75 0.50


(Editing by Bernadette Baum and Lisa Von Ahn)